Cuomo, lawmakers hike some taxes to protect school aid increase

by Marc Humbert

On Board Online • December 19, 2011

By Marc Humbert
Senior Writer

After three years of being battered with flat or reduced state funding, school districts got a bit of pre-holiday cheer from Santa, who surprised many by arriving in the guise of Gov. Andrew Cuomo. In a rare December special session of the Legislature, the governor engineered lightning-fast approval of tax legislation that Cuomo said would protect a planned $800 million increase in school aid scheduled for next year.

Only eight lawmakers voted against the bill, which imposes higher income tax rates on the wealthy.

In adopting the 2011-12 state budget, Cuomo and lawmakers played Scrooge, cutting more than $1 billion in state school aid. But they committed the state to increase school aid by at least 4 percent, or about $805 million, as part of the 2012-13 state budget.

“I want to honor that commitment,” Cuomo said as lawmakers prepared to approve his new tax plan this month. “And we’re going to need revenue to do that.”

Acting with uncharacteristic swiftness, and in the face of rapidly declining revenue projections, Cuomo and legislative leaders agreed on an overhaul of New York’s tax code to produce almost $2 billion annually in extra revenue even while providing a modest, middle-class tax cut.

The end-of-the-year action was a sharp contrast with what then-Gov. David Paterson did when facing his own fiscal crisis in 2009. He asked the Legislature to cut school aid, and when lawmakers balked, he delayed school aid payments. That prompted a lawsuit by NYSSBA and other education groups; it was dismissed after Paterson paid the money.

Cuomo’s action is especially significant considering that he had pledged to allow a $4 billion-a-year surcharge on the wealthy to expire at the end of the year, as scheduled. While that took place, Cuomo persuaded lawmakers to replace it with a tax rate structure that would be only marginally better than the surcharge for those making $1 million or more a year.

After Cuomo claimed this action would “restore fundamental fairness” and “stimulate the economy,” fiscal conservatives squawked.

“The bottom line is that taxes are being raised in New York State, and we are still not dealing with our state’s serious spending problem,” said state Assembly Republican Minority Leader Brian Kolb (R-Canandaigua).

Cuomo stressed that the action in Albany was unlike the gridlock in Washington, renewing speculation that he will run for president in 2016. One blog went so far as to suggest Cuomo might be called on to replace Vice President Joe Biden on the 2012 Democratic national ticket.

The governor said a deteriorating fiscal situation had forced his hand on taxes. A projected 2012-13 state budget gap of about $2 billion had grown to as much as $3.5 billion, he said.

To round up votes for his tax package, Cuomo sweetened the pot for lawmakers by including a new infrastructure fund that would finance construction on roads, bridges and other public facilities; providing more money for flood relief; establishing a program to help inner city youths get jobs; and providing an exemption for small businesses and private and parochial schools from a special tax on employers in New York City and its suburbs to help fund the Metropolitan Transportation Authority.

As part of the MTA tax revision, public schools were also made exempt from the levy. Public schools had been paying the tax and then later were being reimbursed by the state for those payments. That had left some districts forced to borrow money to cover the tax payments, and  burdened by the interest payments.

Schools could also benefit from the infrastructure fund, money that can be used to retrofit schools to make them more energy efficient.

The Cuomo-championed legislation sailed through the Republican-led state Senate, 55-0. In the 150-member, Democratic-controlled Assembly, just eight members voted against the package.

Citing four sources, the Albany Times-Union reported Cuomo had threatened to campaign against any legislator who voted against the package, prompting Assemblyman Steve McLaughlin (R-Schaghticoke) to call the tactic “Spitzeresque.” [In 2007, then-Gov. Eliot Spitzer told Assembly Minority Leader Jim Tedisco (R-Schenectady) that he was prepared to become a “f—-ing steamroller” and roll over Tedisco.] Cuomo said the Times-Union’s report that he conveyed a threat through Minority Leader  Kolb was “inaccurate.” Kolb wouldn’t comment.

Prior to the legislative action, 68 percent of school board members said in a NYSSBA Pulse Poll that they favored increasing tax rates on the wealthy in order to increase state aid to schools. NYSSBA Executive Director Timothy G. Kremer said that while “the new tax code reforms should remove any cloud of uncertainty over whether schools will receive a state aid increase next year … there is more to be done.”

Noting that the governor himself had said unfunded and under-funded state mandates “are throwing budgets out of balance and sending local property taxes through the roof,” Kremer said Cuomo must make mandate relief “the focal point of his agenda for 2012.”

The Cuomo camp appears to be listening. The pro-Cuomo, business-backed Committee to Save New York announced on its website that a priority for 2012 would be mandate relief. Last year, the Cuomo-allied committee spent almost $10 million to promote the governor’s agenda.

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